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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The change in quantity demanded resulting from a change in the price of one good relative to other goods






2. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






3. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






4. Demand for a resource like labor is derived from the demand for the goods produced by the resource






5. The price of a good measured in units of currency






6. 0 < Ei < 1






7. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






8. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






9. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






10. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






11. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






12. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






13. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






14. The most desirable alternative given up as the result of a decision






15. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






16. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






17. Ed = 1






18. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






19. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






20. The sum of consumer surplus and producer surplus






21. Exists at the point where the quantity supplied equals the quantity demanded






22. Entry (or exit) of firms does not shift the cost curves of firms in the industry






23. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






24. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






25. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






26. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






27. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






28. When firms focus their resources on production of goods for which they have comparative advantage






29. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






30. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






31. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






32. The difference between total revenue and total explicit costs






33. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






34. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






35. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






36. The rational decision maker chooses an action if MB = MC






37. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






38. Ed = (%dQd)/(%dP). Ignore negative sign






39. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






40. TR = P * Qd






41. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






42. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






43. The lost net benefit to society caused by a movement away from the competitive market equilibrium






44. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






45. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






46. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






47. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






48. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






49. A good for which higher income decreases demand






50. Occurs when LRAC is constant over a variety of plant sizes